1. The top four cigarette manufacturers in the U.S. are Altria, BAT, Imperial, and Liggett. Their marketing shares are 68%, 22%, 5%, 2%, respectively. All other companies together have 3% of the market share. The top four handgun manufacturers in the U.S. are General Dynamics Corporation, Northrop Gruman Innovation Systems, BAE systems, Vista Outdoor Incorporated. Their marketing shares are 12.7%, 11.7%, 8%, 6%, respectively.

a) Calculate CR4 for the cigarette market and the firearm market in the U.S., respectively. (5 points)

b) Based on your responses in a. Can you infer the market structures and pricing power of the cigarette market and the firearms market in the U.S.? what are the major differences between these two market structures? (10 points)

c) It was reported that in the past two years, every time Altria increased its Marlboro cigarette price, the other three major cigarette manufacturers also followed up by increasing the prices of their own brands of cigarettes. Given this information, can you infer the specific type of market structure of the cigarette market? How do the price & quantity of cigarettes under this market structure differ from those under a perfectly competitive market? (5 points)